Low Oil Prices Actually Hurt Some In The Aviation Industry

Illustration for article titled Low Oil Prices Actually Hurt Some In The Aviation Industry

Since June, when oil peaked at about $115 a barrel, prices have dropped 40 percent. And while the slide in the sludge price is driving airlines to record profits, it's hurting manufacturers of business jets by driving away potential sales.


Canadian aircraft manufacturer Bombardier has said that they're expecting lower oil prices to hurt the sales of their business jets in the Middle East market. Their VP of of sales for the Middle East, Africa and Turkey, Khader Mattar said: "If the prices of oil continue to drop, as we have seen it in the past four to five weeks, then I suspect that there will be some decrease of sales in the region."

But in spite of the cautionary warning, Mattar told The National that he expects the Middle East to be one of the fastest-growing regions for business aviation. In 2013, there were 530 business jets registered in the Middle East. Mattar expects that number to grow to 1,400 by 2033, pointing out that Saudi Arabia has been a traditionally strong area of sales, and that the number of wealthy people in Turkey is increasing quickly.

Illustration for article titled Low Oil Prices Actually Hurt Some In The Aviation Industry

Bombardier Challenger 350 at NBAA in Orlando, by Paul Thompson

The Middle Eastern Business Aviation Association is also expecting strong growth, having 1,200 jets in the region by 2020. Bombardier currently has 100 business jets in the region, which is about 20 percent of the market. Their Challenger series holds 60 percent of the new deliveries market for medium-sized business jets in the region.

Not everyone has such a rosy outlook, however. At the National Business Aviation Association convention in October, Honeywell released their Global Business Aviation Outlook, which said the annual growth rate in demand for new business jets in the Middle East and Africa had dipped to 3 percent — below its traditional 4-7 percent growth rate. Pointing to reasons for the decline in the region, the report said:

"The level of purchase plans is under the world average and unsurprising in that it has been a year of significant political upheaval and ongoing conflict in the region as well as a year in which oil prices have drifted lower and health crises have emerged in Africa."


Bombardier's Mattar also said that financing some aircraft purchases has been a struggle, because banks are worried that governments or regulations affecting the loan may change. He said manufacturers are working to educate banks on aircraft financing, to help transactions go more smoothly.

The next several months will determine whether business aviation sees demand that matches one of these forecasts, but as you can see, there are some big factors in the mix that will lead to the decisions on whether or not to buy these new jets.


Paul Thompson is a aviation journalist with over 13 years of experience working in the airline industry, who maintains the website Flight Club for Jalopnik.com. You can contact Paul to submit story ideas, your own "Plane Porn" photos, and comments regarding this or any other aviation topic via email at Paul@Jalopnik.com


Pardon me if I don't shed a tear because some oil sheik isn't able to buy this year's model of private business jet.